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BlackBerry Slides as Z10 Launch Falls Flat

BlackBerry's (NASDAQ: BBRY) hyped smartphone launch of last Friday continues to drag the company's stock down into a new week. With so much riding on the success of the Z10, it's no surprise. How are you going to compete with established smartphone leaders Apple (NASDAQ: AAPL) and Samsung when your major American retail and telecom partners can't get themselves excited enough about it to run promotions? According to Goldman Sachs analysts, both AT&T (NYSE: T) and Best Buy (NYSE: BBY) retail outlets have barely bothered to promote the Z10 in a crowded smartphone field.

In some respects, this is also an example of "buy the rumor, sell the news" in smartphones. How many times has Apple soared on the back of pre-release hype, only to pull back? However, BlackBerry's launch is different. In the past two trading days, shares have fallen from nearly $17 to just more than $14 -- a 15% haircut. That's not the reaction of a market expecting long-term smartphone success. Analysts at BGC Partners go further than most with a $7 price target on BlackBerry shares, representing a further 50% drop from here. Goldman, by comparison, downgraded the shares from buy to hold after seeing little consumer interest in the Z10.

AT&T's domestic online wireless store seems to be in love with Nokia's (NYSE: NOK) Lumia 920: All but one of the "Top Rated" phones on its wireless splash page are Lumias in various colors. On "What's New," the logical place for the Z10, there's not a BlackBerry to be found. Samsung's S4 dominates the top of the page. It's not until you go to the "Smartphones" tab of AT&T's wireless storefront that the Z10 shows up, under a refurbished Lumia and a one-cent iPhone 4. At least Best Buy features the Z10 on its online storefront, but you have to go to a store to buy it. By the time you get there, you might have changed your mind.

What makes the Z10 stand out from the Lumia and the iPhone? Well, take a look at it:

Take your time to think about it. I'll wait.

AT&T sells brand-new Lumia 920s for $99. The iPhone 4 is practically free. A brand-new iPhone 5 will set you back $199 on the low end -- the same amount you'd spend to get a new Z10. Goldman was expecting the new BB10 operating system to have about a 30% chance of success prior to launch, but now it predicts only a 20% likelihood of success. That might be overstating it. Even the well-received European launch is now being walked back, with consumers returning the Z10 and European telecoms deprioritizing its promotion.

It's hard to stand out in the crowded and mature smartphone market these days. A phone design that offers nothing new over its competition, paired with an unfamiliar operating system that lacks several key apps popular on the two leading platforms, won't get BlackBerry over the hump.

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Comments from our Foolish Readers

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I see that you don't mind quoting an unknown analyst target of $7.00 yet when you mention Goldman you simply say it was a downgrade omitting the target of $17.00 which is approximately three dollars higher than the current price.

Attention Motley Fools...March 28 is going to be a very interesting morning! The estimates are so low across the board! If BB comes out with additional cash, .5-2% higher market share and release Z10 sales that top estimates (which Thorstein H. did say that it was their most successful launch in BB history). This news above combined with the estimated 35% short interest should prove for an interesting way to end the week! I'm from Toronto and I truly believe in the overdue success for this Canadian company. I hope fellow Canadians see the light and start supporting home grown businesses! I personally know 10 ppl that switched from IOS/Android to join the BB bandwagon:)

With only two more trading days left before Blackberry releases its better than expected results on Thursday MORNING it is now too late for the very large institutional short sellers to cover their losses but there is still opportunity for small investors to take advantage of these incredibly cheap prices.

If there was any chance of missing Mr Heins would have certainly warned by now but instead he has been increasingly positive on the worldwide results to date. The last thing he would want to do as the new leader of this great Canadian company is to intentionally mislead his loyal customers and investors. Options expiry at the close of trading on Thursday should also make for an interesting day.

So load up on BBRY, BB.To shares while you can and then sit back and enjoy the action.

Why the iPhone is not selling at Costco....it's because it's not available! Costco would LOVE to sell ALL Apple products, but they can't. Apple will not allow it and that is the only reason the iPhone is not selling there.

Sending report...

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.